12. The outlook for the world sugar market in 1998/99,
the Consultation was informed, was for continued oversupply due to production expanding at
a faster rate than demand. The supply surplus would add to already high stock levels and
was expected to limit any recovery in prices.
13. The weak macroeconomic performance particularly in
the major markets, such as the Russian Federation and Indonesia, exacerbated the
situation. However, some improvement was expected by 2005.
14. World sugar prices continued their declining trend in
1998/99, with the rate of decline accelerating during the first months of 1999. The year
opened with an average WASA price of US cents 8.11 per pound in January, and by the end of
April prices had plunged to a 13-year low of US cents 4.78 per lb. World prices
declined by more than 35 percent in the first three-quarters of 1998/99.
15. FAOs revised estimate of the world sugar
production in 1998/99 was 129.6 million tonnes (raw value), 6.5 percent more than the
126.6 million tonnes assessed for the 1997/98 season. Upward revisions were made to
estimates for cane producing countries, mainly Brazil and India, which more than offset
the downward adjustments in beet sugar production in the European Community (EC).
16. Cane sugar production was currently estimated at 93
million tonnes, or 72 percent of the global output, while sugar produced from beet was
expected to decline further to 36.6 million tonnes.
17. Sugar production in developing countries was
estimated to expand by 5.4 million tonnes from 1997/98 to total 87.6 million tonnes or 68
percent of world production. Output in the ACP countries was expected to account for 2
percent of global output. Among developed countries, production was estimated to reach
42.1 million tonnes.
18. World sugar consumption in 1999 was forecast to grow
at a slower rate of 1.3 percent to reach 125.6 million tonnes, with developing countries
accounting for about 64 percent of the total. Among developing countries, the largest
declines would occur in the Far East, due to reduced purchasing power in several major
markets as a result of weak economies. Consumption in that region was estimated at
41.1 million tonnes in 1999, 1.2 percent more than the previous years level but
well below the previous 5-year average growth rate of 3.5 percent. Demand in Latin America
and the Caribbean was also expected to experience a slower growth rate of below 2 percent,
while in Africa consumption was expected to grow by 200 000 tonnes.
19. Disappearance in developed countries was expected to
remain at similar levels to 1998, mostly due to dietary habits. A growth rate of 1 percent
to 10.4 million tonnes in North America was mainly due to the increase in the United
States, currently assessed at 9.1 million tonnes or 23 percent of developed
countries consumption. Europe (dominated by the EC) would account for 44 percent and
the Commonwealth of Independence States (CIS - dominated by the Russian Federation), 21
20. World sugar trade in 1998/99 would continue to be
affected by an imbalance between export availabilities and import demand. Availabilities
would be expected to remain at about 37 million tonnes and import demand would decline by
5 percent to about 35 million tonnes. In Brazil, competitive export prices following the
devaluation of the Real and a policy shift in favour of greater sugar output would result
in exports in excess of 8 million tonnes, which would counterbalance lower exports from
major exporting countries including the EC. On the importing side, weaker demand was
expected from Russia, the United States and China. The resulting oversupply would add
about 4 million tonnes to global stocks, which were already high, approaching a level of
50 million tonnes and a stock-to-consumption ratio of 40 percent.
21. As early forecasts for the next season did not
indicate a significant variation in world production, prices were expected to largely
depend on the economic situations in major importing countries. The current high world
stock levels would imply that prices would remain low unless demand was significantly
boosted, perhaps by considerable economic growth in the sluggish economies of the major
22. In the medium term to 2005, disparate trends in
demand and production at national levels, coupled in some instances with increased market
access opportunities arising from policy changes in recent years, were projected to give
new impetus to international trade in sugar.
23. Among the main exporters, the most substantial
increases in trade were projected for Brazil and Cuba. Thailand and Australias net
exports were also projected to be substantially greater, but South Africa would achieve
the largest percentage increase (17 percent annually). By contrast the EC which was
the largest net exporting market during the base years (1993-95) was projected to
cut its net exports by about 2.4 million tonnes over the projection decade to less than
2.1 million tonnes.
24. The bulk of the market opportunities for exporters
was expected to be in markets where domestic production could not keep pace with demand.
Regionally among developing countries, it was projected that Africas net imports
would increase by 7.3 percent a year followed by the Far East (5.8 percent annually)
notwithstanding the increase in Thailands projected export expansion, and the Near
East (3.1 percent). Among developed regions too, some large increases in net imports
were projected including in North America with net import growth of 4 percent per year,
5.9 percent per year in the United States alone and 4.1 percent for the former USSR.
25. In terms of policy issues, an earlier study of the
Impact of the Uruguay Round (FAO 1995) concluded that the Uruguay Round Agreement (URA)
would induce increases in world sugar production, consumption and trade, but the overall
effects would be relatively small. Expressed in another way, the scope for reductions in
market interventions was potentially still large.
26. In conclusion, the consequences of policy changes in
world sugar trade which was subject to preferential arrangements, in particular regarding
ACP countries, were highlighted. Already in the decade preceding the conclusion of the
URA, the volume of sugar traded under preferential arrangement had declined from about 8
million tonnes to less than 3 million tonnes. Reductions agreed under the URA on tariff
rates for both raw and white sugar would generally have the effect of further reducing the
value of preferences. However, other aspects of the URA, for example the commitments to
reduce the volume of subsidized exports were expected to be of help to preferential
suppliers, through impacts on prices in third markets. FAOs latest projections
suggested that in the case of the ACP sugar producing /exporting countries, the URA would
raise their export earnings. This would be, however, almost entirely a trade volume effect
as it was projected that the changes in the prices of preferential and non-preferential
sales would be offsetting. In general, for ACP countries, the scenarios explored suggested
that export revenues would benefit more from widespread trade liberalization, which would
help to support free market prices, than from further liberalization limited only to
preference giving countries, which would also have a negative effect on the preference